Tag: Morgan Stanley

Making money with coupons

Ben Kolada

Contact: Ben Kolada

Online coupon directory vendor RetailMeNot, formerly known as WhaleShark Media, filed its IPO paperwork on Monday. A total of seven investment banks crowded onto the offering, which could initially value the company in the ballpark of $800m. Meanwhile, a recent high-priced buyout and a couple of more coupon deals that we hear are in the pipeline could make 2013 a breakout year for the online couponing industry.

RetailMeNot has grown dramatically since its incorporation as smallponds in 2007. Through organic and inorganic growth, RetailMeNot increased total revenue 80% to $145m last year. The company primarily did business as WhaleShark Media throughout its lifetime, but rebranded as RetailMeNot this year, taking the name of a startup it acquired in 2010 and whose websites now account for the majority of its traffic.

No fewer than seven investment banks have piled onto the offering, with Morgan Stanley taking the lead left spot. RetailMeNot plans to trade on the Nasdaq under the symbol SALE.

The midpoint valuation of recent comparable transactions suggests that the company could debut at about $800m, or roughly 5x its trailing sales ($155m as of March 31). RetailMeNot was valued at 5.6x trailing sales in its $159m sale to WhaleShark Media in 2010. More recently, we estimate that Slickdeals was valued at 4.6x sales in its quiet sale to Warburg Pincus at the turn of this year.

At least two other coupon companies will be closely watching RetailMeNot’s debut. We’ve heard that CouponMom and dealnews have also been in the market recently.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

CyrusOne’s steady rise

Ben Kolada

Contact: Tejas Venkatesh, Ben Kolada

CyrusOne, the colocation bull that has now changed hands three times since 2007, debuted on the Nasdaq today with a valuation topping $1bn. The fast-growing company was spun off of Cincinnati Bell but is still majority owned (72%) by the regional telco. Shares popped during early trading, continuing the company’s history of creating considerable wealth for each of its owners.

The datacenter company, which is structured as a real estate investment trust, sold 16.5 million shares at $19 per share, higher than its previously guided $16-18 range. The IPO raised a total of $313.5m, though underwriters have an option to sell an additional 2.5 million shares. Shares jumped approximately 10% when they hit the Nasdaq and held the gains through midday trading. CyrusOne currently sports a market cap of about $1.3bn.

CyrusOne operates 24 facilities, primarily in the Ohio and Texas markets. The company offers colocation services aimed at enterprise-class customers requiring highly available facilities, engineered for dense power and reliability. Morgan Stanley and Bank of America Merrill Lynch were joint bookrunners for its IPO.

This is the third time shares of CyrusOne have traded hands since 2007. And in each transaction, its value has steadily climbed, creating considerable wealth for each of its owners.

CyrusOne’s rising valuation

Date Liquidity event Valuation
January 18, 2013 IPO $1.3bn
May 12, 2010 Sale to Cincinnati Bell $525m
July 11, 2007 Sale to ABRY Partners $130m

Source: The 451 M&A KnowledgeBase

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Millennial Media doubles on debut

Ben Kolada

Contact: Ben Kolada

Taking advantage of the emerging market for mobile advertising, platform vendor Millennial Media leapt onto the public stage Thursday, creating nearly $2bn in market value in its debut on the New York Stock Exchange. The company priced its 10.2 million shares at $13 each – the high end of its proposed range. Shares traded at about twice that level in early afternoon. Millennial Media is trading under the symbol MM. Morgan Stanley, Goldman Sachs and Barclays led the offering, while Allen & Company and Stifel Nicolaus Weisel served as co-managers.

Millennial Media, which has nearly 75 million shares outstanding, currently garners a market cap of $1.9bn. That values the company at 18 times trailing sales, in the ballpark of where we estimate Quattro Wireless was valued in its sale to Apple, but about half the valuation we believe AdMob received from Google. Those two companies are Millennial’s primary rivals, although Millennial stakes its claim as the largest independent mobile ad platform provider.

Interest in advertising technology has been building throughout both the equity and M&A markets. Earlier this month, for instance, telco SingTel announced that it was acquiring Amobee for $321m. (We estimate the startup, which provides mobile ad campaign management software, garnered roughly 9x trailing sales in its purchase by the Singapore telco giant.) Meanwhile, the Adtech pipeline is far from dry, even after a recent slew of big-ticket exits. Earlier this month, advertising intelligence firm Exponential Interactive filed its paperwork to go public. The company, which plans to trade under the symbol EXPN, increased revenue 35% last year to $169m.

The Houses of Morgan are in demand for on-demand work

Brenon Daly

Contact: Brenon Daly

It turns out that the advisers for the largest-ever SaaS acquisition are also the busiest in terms of restocking the ranks of publicly traded subscription-based software companies. J.P. Morgan Securities, which banked SAP, and Morgan Stanley, which advised SuccessFactors, are upper left on the prospectuses of no fewer than five SaaS vendors currently in registration. Between them, the ‘Houses of Morgan’ have a fairly tight grip on the sector, leading the proposed IPOs of on-demand software shops including Eloqua, ExactTarget, Bazaarvoice, Jive Software and Brightcove.

As lead underwriters, the banks stand to pocket tens of millions of dollars in fees from the upcoming offerings. Additionally, they are likely to build on that initial relationship through other advisory services for the companies. For instance, J.P. Morgan co-led Taleo’s IPO in 2005 and, more recently, advised it on its $125m purchase of Learn.com. On an even bigger scale, Morgan Stanley led the IPOs of both RightNow and SuccessFactors and then advised them on their sales, a pair of deals that totaled a whopping $5bn.

China becoming social in public

Ben Kolada

Contact: Ben Kolada

While talk of social companies hitting the public markets has so far focused on US firms such as Facebook, GroupOn and LinkedIn, the first vendor to do so may actually come from the Far East. Dubbed the ‘Facebook of China,’ Beijing-based Renren filed its prospectus on Friday and will reportedly hit the NYSE in two weeks, trading under the symbol RENN.

Founded in 2002, Renren today offers social and professional networking, online commerce and gaming to an audience of approximately 117 million. According to its prospectus, the company added an average of two million users per month during the first quarter. Sales have grown at a similarly quick pace. Net revenue soared from $13.8m in 2008 to $76.5m in 2010, representing a compound annual growth rate of 136%.

Excluding underwriters’ overallotment options, Renren will offer a total of 53.1 million American Depository Shares (ADS). (Lead underwriters are Morgan Stanley, Deutsche Bank Securities and Credit Suisse.) The company expects to price at $9-11 per ADS, which at the top of that range would be a whopping $584m raised. However, if interest in previous Chinese IPOs is any indicator of what to expect, then Renren’s total amount raised could be significantly higher. Just two weeks ago, Beijing-based security vendor Qihoo 360 Technology made its debut on the NYSE, offering 12 million ADSs (excluding underwriters’ overallotment shares). Shares hit the market at $27 each, nearly twice the expected initial offering price of $14.50, and eventually closed at $34 each. Shares have dipped a bit since then, but Qihoo is still sporting nearly a $2.5bn market cap, which is approximately 43 times its 2010 sales of $57.7m.

Profiting from the battle for the datacenter

Brenon Daly

Contact: Brenon Daly

Although the battle between Hewlett-Packard and Cisco Systems over outfitting datacenters is still playing out, some winners have already emerged. First and foremost, the shareholders of 3Com have benefitted tremendously from the turf war between the two tech titans. On Wednesday, HP said it is picking up 3Com for $3.1bn, bolstering its ProCurve lineup with 3Com’s switches and routers, which are Cisco’s core products.

Terms call for HP to hand over $7.90 in cash for each share of 3Com. That’s roughly 50% higher than 3Com shares garnered in an unsuccessful buyout two years ago and nearly four times the price of 3Com stock just one year ago. Additionally, it means that anyone who bought shares in 3Com over the past half-decade will be above water on their holdings when the sale to HP closes in the first half of next year. We can’t say that we’ve seen many situations like that in recent transactions. In most cases this year, the sale prices of public companies – particularly those that have faded in recent years, like 3Com – have been below the market prices they fetched back in 2007. And that was before any takeout premium.

But there are other parties that stand to come out ahead in the HP-3Com deal, as well. We have to imagine that the bankers at Goldman Sachs are glad (if not relieved) to have their client, 3Com, looking likely to have finally been sold. Goldman was advising the networking vendor back in 2007 on its proposed sale to Bain Capital and Huawei Technologies, which dragged on for a half-year before being scuttled due to national security concerns. There are success fees and then there are well-earned success fees.

Meanwhile, on the other side of the desk, Morgan Stanley also has reason to celebrate its work with HP. Not only is the pending purchase of 3Com the largest enterprise networking transaction since mid-2007, but the deal continues a strong recent run by Morgan Stanley. This week alone, the bank advised HP on its $3.1bn purchase of 3Com, AdMob on its $750m sale to Google and Logitech on its $405m acquisition of LifeSize Communications. Altogether, that means Morgan Stanley has had a hand in three of the four largest deals this week.

Instant investment banks

Brenon Daly

We wrote earlier this week that Bank of America’s pending purchase of Merrill Lynch gives the Charlotte, North Carolina-based giant its first real opportunity to pick up M&A advisory work in the tech market. Well, that assessment goes double for Barclays, which plucked Lehman Brothers’ banking unit out of the rubble, and it goes triple for whichever bank – if any – snags perennial tech powerhouse Morgan Stanley. (Reports on Thursday indicated that Morgan Stanley was holding talks with Wachovia, as well as considering a sale to a European institution.)

Of course, the tech M&A business is just a side-note in the unprecedented consolidation of investment banks that’s played out this week. But it’s one that shouldn’t be overlooked. Deal flow in the tech sector has approached a half-trillion dollars in each of the past two years. Even during an off-year like 2008, we’ve already seen some $250bn worth of transactions, more than the full-year total in 2004. That’s a lot of banking fees.

To be sure, there will be a substantial amount of disruption in the tech banking business as the new owners integrate the formerly independent investment banks. (For instance, LogMeIn, which filed to go public in January, still has Lehman listed as its lead underwriter. Lehman’s new owner, Barclays, is hardly known for its equity underwriter business, much less underwriting tech offerings.) But at the very least, the acquiring banks picked up the opportunity to be relevant in a market where deals worth hundreds of billions of dollars are going to get done each year. And, thanks to these historic times, they got the chance on the cheap.